Numerous studies have shown improved functioning after a depression, but often substantial limitations at follow-up remained. The goal of this study is to examine (1) whether functioning returns to pre-morbid levels after a major depressive episode (MDE), (2) predictors of incomplete functional recovery, and (3) how these functional levels relate to those in a non-depressed sample.Data were derived from the Netherlands Mental Health Survey and Incidence Study, a prospective general population study with three waves. Psychopathology was measured with the Composite International Diagnostic Interview (CIDI) and functioning with the Short-Form-36 Health Survey (SF-36). One hundred and sixty-five individuals who met criteria for MDE between baseline and third wave, but not in the 12 months preceding baseline and third wave were selected.Mean post-morbid levels of functioning did not differ from pre-morbid levels although this level still differed significantly from the non-depressed sample. Sixty to eighty-five percent of the respondents did better or showed no change on different scales after recovery from MDE. Co-morbid substance use disorder and anxiety disorder, presence of somatic illness, external mastery, low social support and high baseline functioning were predictors of worsened functioning.Lay interviewers used fully structured diagnostic interviews to determine MDE and functioning was measured using self-report.In general, people who recover from a MDE will also recover from functional impairments. The most important predictors of incomplete functional recovery are clinical and social in nature whereas personality and demographic characteristics are less important.